Monday, June 25, 2012

Although I liked Bill Moyers better when he was a straight up political hack (informal Chief-of-Staff/Press Secretary for President Johnson during the Viet Nam escalation '65-'67) he has, over the years, gotten some good guests.
Yves has the video at naked capitalism, "Matt Taibbi and Your Humble Blogger on Bill Moyers".
Here's the transcript from Moyers & Company:

BILL MOYERS:
Welcome. This past week, Jamie Dimon, CEO of JP Morgan Chase, was back
on Capitol Hill, testifying before the House Financial Services
Committee, as he had earlier done before the Senate Banking Committee.
He was being questioned on how his bank had lost two billion dollars --
or more -- on risky trading. His reception in the House was less fawning
than what he got from the senators. Although many of them also are
beneficiaries of JP Morgan largesse, House members were more combative.

BARNEY FRANK:
You said you have a fortress balance sheet. That assumes there's
something special about the way you are that made us have to worry less.
But we can't assume that's going to be the case for every financial
institution.

JAMIE DIMON:
But I also said that we'd be solidly profitable this quarter. So relative to earnings–

SEAN DUFFY:
You didn't know about these trades. You didn't know about these losses.
How do you come forward today and say the regulators should have known
that -- what one of the best CEOs in the industry didn't know and
couldn't have known?

MICHAEL CAPUANO:
With the regulatory regime that we have today -- we both agree that it's
not what we want, but it's what we have. Do you really think it's a
smart idea to be cutting the legs out of one of those major regulators?
Do you think that's good for America?

JAMIE DIMON:
I have enough problems. I'm going to leave that to you.

MICHAEL CAPUANO:
Well, Mr. Dimon, the only reason I ask is because you have had no
hesitancy whatsoever in expressing opinions on other matters. I thought
you might want to take an opportunity to express one today.

BILL MOYERS:
Coincidentally, just before Dimon’s House testimony, Bloomberg News
published data indicating that JP Morgan Chase receives a government
subsidy worth about 14 billion dollars a year in taxpayer money.

Money, said Bloomberg editors, that “helps the bank pay big salaries
and bonuses, and more important, distorts markets, fueling crises such
as the recent subprime-lending disaster and the sovereign-debt debacle
that is now threatening to destroy the euro and sink the global
economy.”

With me are two guests who can guide us through the thicket of
testimony and beyond.
Matt Taibbi, contributing editor at "Rolling Stone" magazine, has
investigated the folly and corruption of banks and government with
scathing, often profane wit and perception. His book, Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America, described the events leading up to the financial meltdown in 2008. His newest piece for Rolling Stone is a chilling expose called “The Scam Wall Street Learned From the Mafia.”

Yves Smith created and runs Naked Capitalism, the popular blog on
finance and economics. She once worked for Goldman Sachs, McKinsey &
Company, and Sumitomo Bank, and now heads a management consulting firm.
You'll want to read her book, ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.
Welcome to both of you.

YVES SMITH:
Thanks so much.

MATT TAIBBI:
Thank you.

BILL MOYERS:
So in this particular case, what is JPMorgan's sin? That's the question
Representative David Schweikert raised on the day of the hearing. He
asked, "What sin has JPMorgan committed other than being big enough to
lose billions of their own money in a quarter and still turn a $4
billion profit?" Want to take a stab at answering?

MATT TAIBBI:
Yeah, sure. Their sin wasn't the loss. The sin was in being a
too-big-to-fail company where we can't afford to have them go under.
Why are we there in the first place? If this was a company that, if it
went out of business, it wouldn't affect our lives personally and
wouldn't have major ramification for the economy, we wouldn't be holding
hearings in the Senate and the Congress.

We would say, fine, they lost so much, a bunch of money. Too bad for
them. But that's not the case. As we saw in 2008, when these companies
go down, we all end up paying for it. You know, we ended up financing
of, what, five, six, seven trillion dollar bailout in 2008. And if a
company like JPMorgan Chase goes under, there will certainly be some
sort of federal action, which is why we have to know about it. We have
to know what goes on when they have unexpected two, three billion dollar
losses that affects all of us.

YVES SMITH:
They were guilty of gaming the system. And the way that they've done it
is this unit was using depositor money and yet taking very large bets.

And in this unit, all the other banks similarly have similar units in
their treasury department, and the purpose of these portfolios is
supposed to be to have liquid assets in case there's a run on the bank.
And Bloomberg News had a story where they actually reported that all
the other banks take less risk in these portfolios. And that's before
we get to the credit default-- that's before we get to the blow-up part,
just in the, even the simpler part of the portfolios. They have, they
keep more in treasuries. And they have less in corporate bonds. So
Dimon is already taking more risk in this unit than he should have.

And this is something which is frustrating about the testimony.
There's a sort of, you know, one of the, again, stories that Dimon was
promoting was, oh, well, we didn't find out about it. And then when we
found out about it, we jumped on it and now it's all fine. And,
therefore, the regulators shouldn't have been able, you know, how could
the regulators have found about it?

And, therefore, since the regulators couldn't found out, you know,
more regulation is futile. And, in fact, you could have found this
information from the outside. You could have seen that prices were
moving in this instrument in a really weird way.

BILL MOYERS:
Was everybody looking the other way? Have we forgotten so quickly?

MATT TAIBBI:
Well, the entire derivatives market is essentially a gigantic black box.
It's not like the regulators have access to all this information.

YVES SMITH:
I think they're not used to looking for the information.MATT TAIBBI:
Right.

YVES SMITH:
I think it's been acculturated that they're used to having tea and
cookies with the banks and reviewing their internal reports and not
doing any type of external validation and this kind of basic external
checking they could do that they're not habituated to doing.

BILL MOYERS:
A very curious thing happened when the House hearings opened. Some
members of that committee felt that Dimon should be sworn in. But the
chairman of the committee, a Republican from Alabama, Spencer Bachus,
said, no, that wasn't necessary. Am I making too much out of that?

MATT TAIBBI:
I thought that was an incredible moment for a couple of reasons.
Obviously, the reason there was a hullabaloo over that was because of
what happened when Lloyd Blankfein, the CEO of Goldman Sachs, came and
testified before the Senate a couple of years ago. There later was a
controversy over whether or not he had perjured himself in those
hearings.

So the question was if, you know, Jamie Dimon is going to be sworn
in, whether he would have to tell the truth, would be obligated, or
whether it would just be a friendly conversation. But what was amazing
about that, was that it Spencer Bachus who came to Jamie Dimon's
defense. Spencer Bachus is the congressman for the Birmingham, Alabama,
region which has been decimated by the Jefferson County swap disaster,
which was caused by Chase, which was fined $700 million by the SEC.

So here's a guy who represents the county that has been most affected
by Chase's bad behavior, and he comes to Chase's defense in the
hearing, which I thought was-- it set the tone for the whole thing.

YVES SMITH:
Matt mentioned the toxic swaps. Jefferson County isn't the only example.
There have been a whole series of, you know, since Jefferson County
and other municipalities blew up by deals they did before the crisis,
there have been a series of swaps done after the crisis with transit
authorities, where they are losing a tremendous amount of money. You
can look at the way JPMorgan has serviced mortgage loans.

You know, they had to get up and admit that they had been basically
breaking the law, and there were criminal penalties associated with this
law, by foreclosing on servicemen in Iraq and not giving them rate
breaks that they were entitled to. And there are some egregious cases.

MATT TAIBBI:
There's $228 million fine that they paid last year for municipal bond
bid rigging. There was another $153 million fine that they paid for
failure to, for fraud in CDO trades. I mean, there are case after case
after case that involve these criminal charges. And what I thought was
amazing about these hearings is that nobody brought any of those things
up....MORE